Posted on July 19, 2012 |
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The State Budget Crisis Task Force recently released a report identifying Medicaid growth as one of six major areas affecting states’ fiscal stability. The others include federal deficit reduction efforts, underfunded retirement commitments, narrow and eroding tax bases, local governments’ fiscal problems, and state laws. The report cited increasing enrollments, escalating health care costs, and difficulty implementing cost reduction proposals as reasons for Medicaid’s rapid cost growth. The State Budget Crisis Task Force report also noted that Medicaid recently passed k-12 education as the largest area of state spending when all funds are considered. The report cites the Centers for Medicare & Medicaid Services (CMS), which found that Medicaid costs will likely grow at an average annual rate of 8.1 percent between 2012 and 2020 if the Affordable Care Act (ACA) reforms are implemented and at a rate of 6.6 percent if they are not. The U.S. Supreme Court upheld the ACA’s Medicaid expansion provision but made it optional for the states.

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The Affordable Care Act's provisions to increase federal revenue through taxes on high-income workers are among the many proposals that policymakers will face next year, according to a new report released by the Congressional Research Service (CRS). The report provides an overview of the tax and spending policy changes set forth by the Act. Collectively referred to as the "fiscal cliff," these policies would extend current revenue policies (e.g., extending the Bush tax cuts) and change current spending policies (e.g., not allowing the Budget Control Act sequester to take effect) to increase the projected budget deficit relative to current law. The Congressional Budget Office (CBO) estimates that if current law remains in place, the budget deficit will fall by $502 billion between FY2012 and FY2013.
In making these fiscal policy choices, Congress will have to weigh the benefits of deficit reduction against the potential implications of fiscal policy choices for the ongoing economic recovery. Maintaining current revenue and spending policies will add to the deficit, while increasing revenues and reducing spending, as under current law, could slow economic growth. Thus, deficit reduction measures must be balanced against concerns that spending cuts or tax increases could dampen an already weak economic recovery. CBO has concluded that allowing current law fiscal policies to take effect will dampen short-term economic growth, but accelerate long-term economic growth. Conversely, CBO has concluded that postponing the fiscal restraint would accelerate short-term economic growth, but dampen long-term economic growth. In that context, several policy observers have recommended implementing a credible medium-term plan that balances economic considerations with deficit reduction.

The National Association of Medicaid Directors's (NAMD's) new policy brief intends to engage states in shared learning around how Medicaid directors can drive payment and delivery system innovations. The financial climate has caused many states to put pressure on Medicaid Directors to find cost savings wherever they can. To a large extent, states have addressed the inefficiencies in their programs. To fill growing budget holes, states have turned to more blunt instruments, such as cutting benefits, cutting eligibility, and cutting provider rates. This NAMD report encourages states to seek more sustainable reforms that allow the Medicaid program to provide high-quality services while reducing the share of health care programs consume in state budgets. To aid in implementing these initiatives, NAMD supports networking among Medicaid directors on current delivery and payment reforms in their states. States shared their experiences, including challenges and lessons learned.

The Center on Budget Policy and Priorities (CBPP) published an article which found that the Affordable Care Act's (ACA's) Medicaid expansion would "add very little to what states would have spent on Medicaid without health reform, while providing health coverage to 17 million more low-income adults and children." The paper reported that "contrary to claims made by some of the Medicaid expansion’s critics, the expansion does not impose substantial financial burdens on states," as the additional projected spending "equals 2.8 percent of what states would have spent on Medicaid in the absence of health reform."

Under the Affordable Care Act (ACA), 16 to 20 million more Americans will become eligible for Medicaid, starting in 2014. To help meet this large demand, the ACA requires state Medicaid agencies to increase primary care provider (PCP) reimbursement to the level of Medicare rates in 2013 and 2014 and provide federal funding to cover the additional cost. With Commonwealth Fund support, the Center for Health Care Strategies has created a guide for states, "Implementing Medicaid Primary Care Rate Increase: A Roadmap for States," which outlines key implementation and planning activities that states can undertake now to prepare for these changes. The roadmap provides advice on how to analyze fee schedules, engage stakeholders, leverage policy opportunities, and other tasks.

In a new report, The Center on Budget and Policy Priorities takes on several studies by Milliman, Inc. commissioned by state officials critical of the health reform law. CBPP finds they "produce overstated estimates of the costs of the Medicaid expansion because they rely on a number of problematic assumptions."

The Centers for Medicare & Medicaid Services (CMS) announced that it is seeking input on methodologies for determining Medicaid eligibility. The new guidelines use a simple income test based on the applicant's modified adjusted gross income (MAGI), as defined in the Internal Revenue Code (IRC).
The Affordable Care Act (ACA) will expand Medicaid to include...

The Centers for Medicare and Medicaid Services has issued a notice of proposed rulemaking (NPRM), which, the summary explains, proposes to "amend the definition of Mechanized Claims Processing and Information Retrieval Systems to include systems used for eligibility determination, enrollment, and eligibility reporting activities," modifies "our regulations so that the enhanced Federal financial participation (FFP) is available for design, development and installation or enhancement of eligibility determination systems...," and proposes "that all Medicaid Management Information Systems (MMISs) meet certain defined standards and conditions in terms of timeliness, accuracy, efficiency, and integrity and that they achieve high positive levels of consumer experience, acceptance and satisfaction in order to receive enhanced FFP."

Medicaid provides health insurance to the poorest and most medically vulnerable populations. Low-income pregnant women, children, and very poor parents of minor children are the majority of beneficiaries; Medicaid also provides coverage for children and adults with severe disabilities, as well as “wrap-around” coverage for low-income Medicare beneficiaries who cannot pay for services and cost-sharing that Medicare does not cover, particularly institutional and home- and community-based long-term care. Medicaid is jointly funded by states and the federal government and administered by states under broad federal standards.

In recessionary times, states seek to reduce Medicaid spending; paradoxically, this is when the need for public insurance may be the highest. During the recession that occurred in the early 2000s, two-thirds of all states reduced Medicaid eligibility, removing between 1.2 and 1.6 million children and adults from the program before Congress enacted legislation barring further cuts as a condition of additional federal assistance. The current recession is far more serious, and state budget shortfalls, far greater.